Market Vectors® Agribusiness ETF

Natural gas prices are critical for nitrogen and ammonia-based phosphate fertilizer producers.

Mosaic (MOS) released its 2Q17 earnings on August 1, 2017, and reported EPS (earnings per share) of $0.28, which beat analysts’ estimate of $0.25.

Phosphate fertilizer prices are key to Mosaic’s (MOS) Phosphate segment’s sales, earnings, and stock price.

For the week ending October 28, the overall movement in urea prices was flat to positive. Granular urea prices rose 6.6% to $211 per metric ton in China.

Last week, potash prices continued to show weakness week-over-week. Prices were broadly flat to positive for the week ending April 21.

Of the 22 analysts surveyed, about 32% of them gave Mosaic (MOS) a “buy” rating. About 41% of analysts issued a “hold” rating, and only 27% issued a “sell” rating.

With CF Industries’ production capacity increasing, its cash flow per ton of product is also expected to increase.

The significance of potash price Wholesale potash price is one of two factors (the other being sales volume) that influence potash producers’ revenues. When prices rise, so does revenue, which will translate to higher profitability (margins), earnings, and share prices. However, when prices fall, they will have a negative impact on fundamentals and share prices. […]

Overall, 4Q15 potash shipments declined 16% to 1,931 thousand tons, from 2,039 thousand tons in 4Q14. Most of the decline came from the international crop nutrient shipments.

After a year of declining sales and increasing costs, management seems much more optimistic regarding potash as well as Langbeinite.

In the last 12 months, PotashCorp (POT) has earned about 36% of its total sales from its Potash segment.

Agrium’s (AGU) earnings for 1Q17 are estimated to fall from $0.05 per share in 1Q16 to -$0.06 per share.

CF Industries’ (CF) earnings have been falling for the past five years, and it reported negative earnings in 4Q16.

Uralkali’s latest move might be considered a punishment. But also note that outside forces can create a more competitive environment.

Last week, MAP (monoammonium phosphate) prices in Brazil continued their uptrend, while prices in NOLA (New Orleans) moved sideways.

As crops widely trade in the international market, they often converge with each other if transportation costs aren’t so high.

Unlike PotashCorp (POT), Mosaic (MOS), and CF Industries (CF), Agrium (AGU) has a large retail business, giving the company more stability in earnings.

CF Industries (CF) reported its quarterly earnings on August 2, 2017. Its EPS was $0.10, which was in line with analysts’ consensus estimate.

As of January 23, 2017, one of the six analysts covering Intrepid Potash has a “buy” recommendation for the company over the next 12 months.

With a gross deficit, Intrepid Potash reported an adjusted net loss per share of $0.23 in 2Q16, which would also make it the fifth consecutive quarter that the company has reported a net adjusted loss.

Generally, a capacity increase tends to lag demand growth, as producers like to see a stronger market before making significant investments.

In the week ending January 20, average MAP prices in Brazil rose 2.1% to $343 per metric ton from $336 per metric ton the previous week.

CF Industries reported second-quarter sales of $1.3 billion, which beat analysts’ estimate of $1.2 billion.

Average DAP prices in China were flat at 2,669 Chinese yuan per metric ton last week. DAP prices in Morocco remained unchanged at $340 per metric ton.

Over the years, Intrepid Potash (IPI) has shifted its business model to focus more on Trio.

In this article, we’ll compare the company’s potash cost of goods per ton to its average selling price per ton and those of other players in the market.

During the first nine months of 2015, Potash Corporation’s free cash flows declined to $913 million from $1,175 million in the corresponding period in 2014. This was primarily due to a decline in potash prices.

The average DAP price at US Gulf NOLA for the week ended March 25 rose to $340 per metric ton ($308 per short ton) compared to $302 per metric ton ($333 per short ton) the previous week.

CF Industries has resorted to leverage to fund its projects, which are expected to create more nitrogen capacity and, in turn, benefit shareholders.

In September, the global wheat inventory declined 1.5% to 249 million metric tons compared with 252 million metric tons in August 2016.

PotashCorp’s average potash selling price fell ~34.0% to $157 per ton in 4Q16, from $238 per ton in 4Q15. Potash prices in North America fell ~35.0%.

Like Monsanto (MON), FMC Corporation (FMC) is in the business of crop protection products. The majority of FMC’s sales come from its Agricultural Solutions segment.

Overall, the nitrogen prices have weakened in 3Q15, falling to $319 per metric ton from $356 per metric ton in 3Q14.

Industry concentration Industry concentration is a factor that affects competition. When only a few firms occupy a large portion of the industry’s revenue, competition tends to be less, as companies try to live with each other to maintain profits. On the other hand, when there are a large number of firms vying for market share, […]

Potash fertilizers Most of the fertilizer companies we’ve discussed in this series sell all or some of the three NPK (nitrogen, phosphorous, and potassium) macronutrients. To learn more about these macronutrients’ key role in agriculture, read Agricultural Fertilizer Industry: Your Comprehensive Overview. In this part, we’ll look at what 2017 meant for potash producers. Price trends […]

Fertilizer stocks have failed to impress investors in 2018. The VanEck Vectors Agribusiness ETF (MOO) has returned ~1.4% year-to-date.

CVR Partners (UAN) emerged as the top gainer among fertilizer stocks with a 6.7% rise last week to close at $3.18 per share.

Analysts’ ratings So far in this series, we’ve discussed analysts’ estimates for Agrium’s (AGU) 3Q16 sales, margins, and earnings per share. While you can gauge the outlook for the company using these estimates, it’s also helpful to look at analysts’ recommendations and price targets for Agrium over the next 12 months. Ratings and price targets Overall, […]

The merger between Monsanto (MON) and Bayer is worth $66 billion. It’s one of the largest deals in the agribusiness (MOO) industry.

Out of 16 analysts surveyed by Bloomberg, about 50% have “buy” ratings for CF Industries (CF). About 44% have “hold” recommendations, and one has a “sell” rating for the company.

In 3Q16, Agrium’s Retail segment contributed 84% of total gross profit, with crop protection and crop nutrients making up the majority of segment sales.

It’s now time to look at what investors are paying for CF Industries prior to its 2Q17 earnings. Earlier, we learned that CF Industries is expected to report negative earnings per share in 2Q17.

In 4Q17, the overall nitrogen shipments of the five companies discussed below moved lower year-over-year.

Bunge’s (BG) Agribusiness segment processes oilseeds into vegetable oils.

On September 12, 2016, PotashCorp and Agrium announced their intention to combine in a merger of equals. But China and India have set conditions.

The supply-demand imbalance will further push down potash prices in the coming years. It will hurt companies such as PotashCorp, Mosaic, Intrepid Potash (IPI), and Agrium (AGU).

So far this year, some major agribusiness stocks, particularly in the fertilizer sector, have performed poorly.

CF Industries (CF) is set to announce its 4Q16 earnings on February 15, 2017, with estimated earnings per share of -$0.05. In 4Q15, CF Industries reported EPS of $0.76.

During 2Q17, CF Industries’ (CF) overall gross margins fell steeply year-over-year from 46.5% to 15.3%.

As of December 25, 2017, Monsanto stock was covered by 18 analysts according to Reuters. The current consensus rating on the stock stood at 2.56.

CF Industries (CF) closed at $27.3 per share on June 9, which was 13.4% lower than its levels at the beginning of this year.

The importance of capacity utilization Capacity utilization measures how much of an industry’s or company’s available production output is being used. It’s based on dividing actual output by potential output. Because an industry or firm will often try to match production to demand, a rising capacity utilization rate means faster growth in demand relative to […]

China is one of the largest fertilizer consumers in the world. Investors are concerned that retaliatory measures might hurt fertilizer companies.

In the week ending April 7, 2017, fertilizer affordability didn’t change. Notably, the Fertilizer Affordability Index remained flat at 0.60x week-over-week.

Fertilizer stocks plummeted on the heels of the announcement that Russia’s Uralkali was quitting the Belarusian Potash Company cartel. The market overreacted.

Last week, which ended September 7, the VanEck Vectors Agribusiness ETF (MOO) fell 1.8%, while the S&P 500 Index fell 1%.

China is the largest consumer of nitrogen fertilizers, but it produces most of it within its borders. Urea is Chinese farmers’ top choice.

Natural gas and nitrogenous fertilizers Natural gas is a major raw material input in the production of nitrogenous fertilizers, such as urea and ammonia, ranging from 40% to 70% of cost of goods sold. A higher natural gas price increases the cost of goods sold and compresses margins. This in turn lowers earnings and free […]

Out of the 14 Wall Street analysts covering Israel Chemicals (ICL), only one has a “buy” recommendation on the company, 12 have a “hold” recommendation, and only one analyst has a “sell” recommendation.

Mosaic (MOS) continued to enjoy higher margins at 7%—compared to Agrium’s (AGU) margins at 5%. Mosaic’s margins were flat year-over-year.

About 56% of Wall Street analysts still have “buy” recommendations for CF Industries.

In the week ending March 31, 2017, the Fertilizer Affordability Index fell slightly to 0.60x from 0.62x the previous week.

Following Mosaic’s 2Q16 earnings release, Wall Street analysts revised their next-12-month price target down to $25.48 from $25.64.

CF Industries (CF) reported its 1Q17 earnings on May 3 after the market closed. The company posted adjusted EPS (earnings per share) of $0.05, which missed analysts’ revised estimate.

Today, RBC upgraded CF Industries (CF) from its “underperform” rating to “sector perform.”

CVR Partners (UAN) emerged as the top gainer last week, rising 17.4% week-over-week to close at $3.70. CF Industries (CF) followed, rising 4.4% to close at $39.30.

Average weekly potash prices in Vancouver fell 2% to $220 per metric ton during the week ending September 9—compared to the previous week.

CVR Partners missed both top-line and bottom-line estimates for the second quarter, and the stock fell 4.5% after the earnings release.

When crop prices are high, a farmer will likely earn more income. In a soft crop price environment, a farmer might look to cut down the cost of fertilizers.

Recently, the Fertilizer Affordability Index has seen an upward trend.

Back to Part 1 Share of market cap While $3.7 billion and $2.7 billion of cash may not seem like a lot compared to Apple’s ~$150 billion, it’s crucial for investors not to get distracted by the absolute amount. What’s important for investors is knowing how much “excess cash” they’re receiving based on how much […]

Fertilizer affordability has seen some tightening in the last couple of months.

According to Uralkali, the biggest drop in demand should come from China, which has delayed its contract negotiations.

Without an understanding of factors that affect crop prices, it would be difficult to formulate a view on future crop prices and demand for nitrogenous fertilizers.

MAP (monoammonium phosphate) prices hit a low of $343 per metric ton in August but have been on an upward momentum since then.

The total sorghum production in the world is expected to be about 54.1 million metric tons in the 2014–2015 season. The US is the top producer.

In the week ended February 23, the Fertilizer Affordability Index rose to 0.71x from 0.7x a week ago.

Nutrien (NTR) has a consensus recommendation of “buy.”

Last week, which ended July 13, was broadly negative for the agribusiness sector. The broader market index was positive.

In its January report, the USDA (United States Department of Agriculture) reported that the world’s ending stock for wheat rose to 253 million metric tons from 252 million metric tons in December.

On April 19, Barclays downgraded PotashCorp’s stock to “underweight” from “equalweight.” The company also cut its price target to $14 from $16.

Just like the U.S. dollar is a key influence to crop prices, the strength or weakness of the Indian currency, the rupee, has a significant impact on potash demand. As potash is traded globally, the standard currency for exchange is in U.S. dollars. When the Indian rupee weakens, it is often a negative for potash […]

Last week, the weekly price movement was broadly flat to negative. DAP prices at the US NOLA fell by as much as 96 basis points week-over-week.

Last week, the MAP prices in Brazil rose as much as 5.6% week-over-week to $394 per metric ton from $373 per metric ton a week ago.

There’s a handful of big players in the agricultural fertilizer industry. Setting up business requires huge capital, which makes for a high barrier to entry.

At the end of 2017, after receiving final regulatory approval for the merger, PotashCorp and Agrium combined into a new company called Nutrien (NTR).

Wheat prices traded at an average of $4.4 per bushel in 2016, lower than their average of $5.1 per bushel in 2015.

In the recent quarters, fertilizer companies (MOO) have rationalized their output and costs to sustain the downward momentum in fertilizer prices that seemed to keep going down.

Last week, which ended October 12, fertilizer affordability was unchanged week-over-week.

Potash prices over the past few years have been considerably lower than what we saw during their peaks of ~$482 in 2011 and ~$870 in 2009.

A few days ago, Monsanto (MON) agreed to Bayer’s takeover offer of $128 per share for a total deal value of $66 billion.

On August 13, the crop index stood at 89.9. It rose by 1% following the USDA’s latest stock-to-use ratio, which was published on August 12.

It isn’t surprising to see that current fertilizer prices are more affordable compared to the base year because prices have fallen significantly.

PotashCorp (POT) is set to announce its 3Q16 earnings on October 27, 2016. It’s still in negative returns territory, falling 7.2% so far this year.

Mosaic (MOS), which has historically traded at a high valuation multiple of 9.2x, is currently trading at an enterprise value to next 12-month EBITDA ratio of 5.7x.

Industry experts often show ex-China global urea capacity utilization because China’s export tax makes domestic producers’ urea more expensive for international buyers.

The Fertilizer Affordability Index kept trending lower last week, continuing its two-week streak.

In the Oilseeds segment, Bunge’s focus has been to enhance its footprint in the major growth regions.

Potash stocks struggled for most of 2016. In 1H16, potash demand was negatively affected due to delays in potash contract settlements in China and India.

Continued from Part 1 Monsanto and DuPont Two industry giants dominate the seed industry, Monsanto Co. (MON) and DuPont (DD), which together held ~62% of the industry’s revenue in 2012. Why are these two companies dominant players in the industry? Let’s explore. Patent protection One big differentiator between seed and fertilizer stocks is patentability. Companies […]